‘Staging’ of the Managed Care Market Is Crucial

ORLANDO--Just as oncologists base treatment decisions on disease stage, they may base business decisions on the stage of the managed care market in their area, said Paula Filler, vice president of the Sachs Group, Maplewood, NJ, in her presentation at an education meeting of the American Society of Clinical Oncology (ASCO).

"Many people believe that managed care has a product life cycle and can be staged," Ms. Filler said. "We assume that trends seen in other markets paint a picture of lessons that can be applied to your own market." The data she presented on managed care stages were compiled from proprietary research the Sachs Group has done with 100,000 consumers in markets across the nation.

Early stages. The very early stages (1 and 2) are concerned with the acquisition of members, she said. In stage 2, the health plan’s strategy is to develop a network, emphasize the plan’s name and its affiliated physicians and hospitals, and develop a marketing strategy.

On the consumer level, name familiarity is very important, Ms. Filler said. The consumer looking to join a plan wants to know if his or her primary care physician is in it, the extent of the coverage, and the plan’s reputation.

She gave as an example of staging in a plan’s development the Oxford Health Plan in New York. In stage 2, this plan advertised that the reason to join was because of ease of getting referrals and authorizations. But, in a fledgling market, managed care plans are an unfamiliar commodity, and the people looking at these plans may not understand terms like referral and authorization. Consequently, Oxford faced an uphill battle in the early stages.

In contrast, a Blue Cross-Blue Shield plan pitching its HMO products found that, in the early stages, the "Blue" name helped tremendously, as consumers felt that they could switch to an HMO and still stay with Blue Cross.

Stage 3 shift. In stage 3, the goal begins to shift from acquiring new members to retaining them. Consumers now understand the concept of managed care and are beginning to comparison shop, leading to competition in price and referrals, Ms. Filler said. The plans’ promotional focus is no longer on breeding familiarity with consumers but on product differentiation.

For instance, the Oxford Health Group that did so poorly against the Blues in stage 2 was able to make its mark in stage 3 by advertising alternative medicine as part of the plan, giving the plan a niche in the local market.

Stage 4--Focus on quality. By stage 4, 60% to 70% of all commercial members in an area are already enrolled in a managed care plan, Ms. Filler said. This is where niche marketing becomes solidified, and plans begin to advertise to a specific group--along ethnic lines for example. It is at this stage that the specialty practices such as oncology need to sit up and take notice.

"For oncologists, by stage 4, you need to make sure you are aligned with the key winning plans, as they command the power in the market," she said.

By this stage, plans are more efficient in handling claims and services, and also have the ease of access that the consumer wants. When these factors no longer differentiate plans, consumer choice is driven by the quality of medical care given.

"As physicians, you really control some of the important drivers of plan satisfaction in the later stage market," she said. By stage 4, 61% of the insured population under age 65 is enrolled in an HMO, PPO, or open access plan as opposed to less than 30% in stage 1. The focus on quality of care and patient satisfaction becomes acute at this stage.

While the message seems to be that managed care is a band wagon that will pass by if you don’t jump on, Ms. Filler reassured the audience that if the local market is still in the early stages, "there is still time to determine your strategy for when the managed care caravan comes to your town."

In determining strategy, she advised physicians to keep an eye on what other key players in the area are doing--whether employers are contracting directly with large multispecialty practice groups; whether the local HMOs are in a battle for price and premiums that will affect its negotiations with physicians; and whether the plans have penetrated the Medicare market.